5 Toxic Stocks You Need to Sell

Here's a technical look at five toxic stocks to unload before the summer doldrums take hold.

That's more or less what's happening right now in insurance giant AIG ( AIG). We last looked at the rectangle pattern forming in shares AIG back in early June, when the broad market was still inside its trend channel. Clearly, that's no longer the case.

AIG broke down below $43 in yesterday's session, sparking a sell signal for shares. While the relatively tight range of AIG's triangle means that downside is likely to be pretty contained, there's still a while to go before AIG hits support around $39.

Whenever you're looking at any technical price pattern, it's critical to think in terms of those buyers and sellers. Triangles, rectangles and other pattern names are a good quick way to explain what's going on in a stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares.

That support level at $43 was a price where there had been an excess of demand of shares; in other words, it's a place where buyers were more eager to step in and buy shares at a lower price than sellers were to sell. That's what makes the breakdown below $43 so significant. The move indicates that sellers are finally strong enough to absorb all of the excess demand above that price level this week.